The European Commissioner charged with forging high cross-border standards in financial reporting has likened published accounts to ‘bikinis: much more interesting for what they conceal than for what they reveal – regardless of more exacting accounting standards’.
Ireland’s European Union (EU) internal market commissioner Charlie McCreevy told a Chartered Institute of Management Accountants’ qualification-conferring ceremony in Dublin, that accountants should better rely on commercial horse sense.
He said: ‘tougher regulations and laws may help stamp out false accounting. But creative accounting will always be with us – even if recent developments in international accounting standard-setting makes it more challenging.
‘That’s why the task of the non-executive director, of the fund manager, of the banker, of the supplier, or of any other interested party in a company’s underlying financial health, is to ask the many questions that the published accounts don’t answer’.
McCreevy, who has promised not to deluge business with new EU regulations, said: ‘the view that more frequent reporting by companies increases transparency is one about which I am deeply sceptical. It is too easy to massage a set of quarterly or half-yearly figures’.
Skimping on investment could boost profits in one period, but lessen them the next, through reduced customer service quality and loyalty, he said.
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